The organic products sector covers a broad range of product lines produced under the organic agriculture system. It includes the various enterprises engaged in growing crops and raising animals (organic production), processing the fresh produce (organic processing) and trading and distribution of the products to trade buyers and consumers (local and export marketing). Major Philippine organic products for export include muscovado sugar, fresh bananas, banana chips, desiccated coconut, banaba leaves and virgin coconut oil. Other organic products are chicken, vegetables, vinegar, rice, eggs, mango products, juices, herbal teas/supplements, coffee, fruit juices, cocoa, culinary herbs/ spices, among others.

The organic industry in the Philippines is still considered to be in its infancy or emergent stage. Its development and promotion have been spearheaded by the private sector, non-government organizations (NGOs) and people's organizations. More recently, efforts to develop the sector have expanded with the active participation of the government and sustained collaboration among stakeholders.

Majority of organic producers supplying the domestic market are community- based, small and medium enterprises spread out in various parts of the country. Exporters to the foreign market include multinationals, medium and large- scale companies based in Mindanao, Negros, Central and Southern Luzon. Enterprises obtain their organic certification from a local certifying body like the Organic Certification Center of the Philippines (OCCP) or international certifiers which may have tie-ups with locally-based inspectors. Other groups that cater to the local market install their internal control system among their constituents to guarantee the products as organic or in the process of becoming organic.

The global organic market was estimated at US$27.8 billion in 2004, up from US$23 billion in 2002. Global sales was expected to expand by US$2.4 billion in a year, equivalent to a 9% annual growth rate, and would have reached US$ 30 billion in 2005. The European Union (EU) accounted for 49.3% of total sales worldwide while North America accounted for 46.7% in 2004, or a total of 96% for the two regions. In terms of country sales, the U.S. is the leading market, followed by Germany, United Kingdom, Italy, France and Switzerland.

Organic food has no Harmonized System (HS) classification and is not registered by the local Customs Bureau. Thus, there are no official trade statistics on export volume and value for local organic products. For the Philippines, unofficial estimates placed the export value for organics at US$10 million or more in 2003, and at an estimated 20% annual growth rate, it would have reached US$18 million or more in 2006. The bulk of organic food export is undertaken by companies which produce organic versions of their conventional products such as desiccated coconut, fresh Cavendish and balangon bananas, banaba leaves, banana chips and virgin coconut oil. Major export markets are Japan, U.S.A., Canada and Europe.

There has been a significant increase in the hectarage under organic management in the Philippines. From 3,500 hectares and 500 farms in 2002-2003, the area expanded to 14,134 hectares and 34,990 farms in 2004, based on IFOAM statistics published in 2004 and 2006. Despite this increase in coverage, the organic area was estimated to be 0.12% only of the total agricultural land in the country.

There are no reliable estimates of the total number of enterprises and ventures engaged in the organic and natural products sector at present. Most companies in the industry are small to medium in size. These are spread out in various parts of the country.

The value chain of the organic sector is structured in a manner similar to the agriculture industry and characterized with farmers cultivating small parcels of land. Some operations cover the entire chain from production to processing and marketing activities. Some producers sell their produce to consolidators (private sector) or through cooperatives and NGOs that provide marketing services. Consolidators and processors provide processing and/or trading as value adding activities while cooperatives and NGOs provide financing or training support to farmer growers.

Issues on the inbound logistics of the sector's value chain concern the lack of supply and insufficient quality of organic inputs. Producers have limited knowledge on technologies that will aid the production of organic inputs within the farm, as well as inadequate know-how on organic conversion technologies. Other issues include difficulty in meeting the terms and conditions of funding sources, limited knowledge of the market, and co-mingling of both organic and conventional produce.

There are also many issues at the operations level of the value chain, notably the limited access to training and mentoring services regarding organic agriculture technology, lack of trainers training for organic certification, inadequate productivity enhancement programs, difficulty in getting GMP and  HACCP certification and lack of market-driven production planning. Aside from these, there are the need for sharing and dissemination of best practices, extensive R and D programs, extending the shelf life and freshness of commodities, cold chain system, greenhouses/common services facilities, and mechanism for price monitoring.

At the outbound level, the use of ICT is not yet maximized to manage outbound activities. Sourcing of packaging consistent to the lifestyle promoted by organic products is also needed. Packaging design is not distinct enough to differentiate an organic product from a conventional product. Payment terms and other conditions of large supermarket chains are also not friendly to small producers.

At the marketing and sales part of the value chain, issues involve limited awareness/education on compliance with organic standards and marketing requirements, lack of solid market information as basis in crafting a marketing strategy, need for marketing mechanism and capability building as well as intensive promotion and consumer awareness. Under service, there is a need to maximize the use of e-commerce to enhance connectivity with buyers and to tap the fair-trade movement to encourage and sustain fair-trade practices in the industry.

Being relatively young, the organics sector needs to have an appropriate industry development plan to set the proper directions for its growth over the medium to long term and define the parameters for its coverage. A basic requirement for continued development is expanding the awareness and acceptance by the local market for organic produce.

Over the short to medium term, the organic sector needs to signficantly expand market awareness for its products and improve the capability of producers to supply organic certified and properly packaged items to the market. Specific programs which the sector can consider undertaking include the following: 1.) market development program which combines commercial marketing and social marketing;  2.) research/development on organic production and processing and the dissemination of R & D findings; 3.) establishment of a resource information and advocacy center which will keep and enhance the knowledge-based assets of the organic sector and make these accessible for information and guidance of stakeholders;  4.) human resource development to build the capability of the various stakeholders in key areas of technical, marketing and management functions critical for organic production; and  5.) financial sustainability program which will aggressively source and build up funds for the development of the sector. 

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